Module 6 Finance - Pro Forma Income Statement and Balance Sheet
Module 6 - Finance
Pro Forma
Pro Forma Income Statement and Balance Sheet
Below is the income statement and balance sheet for Blue Bill Corporation for 2020. Based on the historical statements and the additional information provided, construct the firm's pro forma income statement and balance sheet for 2021.
Blue Bill Corporation
Income Statement
For the year ended 2020 Projected
2019 2020 2021
Revenue $60,000 $63,000
Cost of goods sold 42,000 44,100
Gross margin 18,000 18,900
SG&A expense 6,000 6,300
Depreciation expense 1,800 2,000
Earnings Before Interest and Taxes (EBIT) 10,200 10,600
Interest expense 1,500 1,800
Taxable income 8,700 8,800
Income Tax Expense 3,045 3,080
Net income 5,655 5,720
Dividends 750 800
To retained earnings $4,905 $4,920
Additional income statement information:
Sales will increase by 5% in 2021 from 2020 levels. 5%
COGS and SG&A will be the average percent of sales for the last 2 years. Revenues $123,000
Depreciation expense will increase to $2,200. $2,200 COGS 86,100
Interest expense will be $1,900. $1,900 COGS %
The tax rate is 35%. 35% SG&A 12,300
Dividend payout will increase to $850. $850 SG&A %
Blue Bill Corporation
Balance Sheet
December 31, 2020 Projected
2020 2021
Current assets
Cash $8,000
Accounts receivable 3,150 5.0%
Inventory 9,450 15.0%
Total current assets 20,600
Property, plant, and equipment (PP&E) 28,500
Accumulated depreciation 16,400
Net PP&E 12,100
Total assets $32,700
Current liabilities
Accounts payable $3,780 6.0%
Bank loan (10%) 3,200
Other current liabilities 1,250 3.0%
Total current liabilities 8,230
Long-term debt (12%) 4,800
Common stock 1,250
Retained earnings 18,420
Total liabilities and equity $32,700
Additional balance sheet information:
The minimum cash balance is 10% of sales in 2021. 10%
Working capital accounts (accounts receivable, accounts payable, and inventory) will be the same percent of sales in 2021 as they were in 2020.
$8,350 of new PP&E will be purchased in 2021. $8,350
Other current liabilities will be 3% of sales in 2021. 3%
There will be no changes in the common stock or long-term debt accounts.
The plug figure (the last number entered that makes the balance sheet balance) is bank loan.
Cash Budget
Cash Budget
Sales for Blue Bill Corporation are projected as follows for the months of June through November:
June $200,000
July $200,000
August $200,000
September $300,000
October $500,000
November $200,000
Credit sales account for 70% of the month sales and are collected one month after the sale. 70% 30%
Other receipts for October are $50,000. $50,000
Variable disbursements are 60% of sales each month. 60%
Fixed disbursements are $10,000 each month. $10,000
$80,000 should be included in August for taxes. $80,000
The company is obligated to make a $400,000 debt repayment in November. $400,000
Beginning cash in June is $50,000. $50,000
Desired ending cash each month is $10,000. $10,000
Complete the monthly cash budget for Blue Bill Corporation for June through November.
Blue Bill Corporation
Cash Budget
June July August September October November
Sales
Cash sales
Collections
Other Receipts
Total cash receipts
Variable disbursements
Fixed disbursements
Other disbursements
Total cash disbursements
Net change during the month
Beginning cash
Ending cash
Required cash
Excess cash to invest
Cash borrowed
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Rating:
/5
Solution: Module 6 Finance - Pro Forma Income Statement and Balance Sheet